Last month, both MVP Health Care and BlueShield of Northeastern New York said they were establishing mandatory caps on their small-group prescription drug benefits.

For Schenectady-based MVP, the limit was $2,000 per person. For BlueShield, the Latham subsidiary of HealthNow NY of Buffalo, it was $2,500. A year earlier, Capital District Physicians' Health Plan of Albany had implemented caps on some of its small-group drug plans.

Then, in early October, MVP changed its mind. The insurer issued a bulletin to brokers saying its cap would instead be offered as an optional rider on small-group HMO and point-of-service (POS) plans.

Insurers and some employers view caps as an easy way to save money. A prescription plan with a ceiling can cost an employer up to 20 percent less than one with unlimited coverage.

Christian Miller, senior director of corporate pharmacy services for HealthNow, said the company felt it had to implement caps, starting with Oct. 1 renewals, because some of its competitors had them and "we needed to make a change to become more price-competitive."

But caps do not sit well with everyone. Phil Alban, employee benefits consultant for Capital Bauer Insurance Agency Inc. of Colonie, said he had left a September meeting with MVP "feeling depressed" and--with the three main local insurers all imposing caps--as if "some of our worst fears [were] coming true."

"They need to make strategic financial decisions, and I understand that," Alban said. "But my bias is with the consumer."

Help wanted

Rising health care costs rank among the biggest concerns of small businesses, and prescription drugs are one of the fastest growing components of those costs. Insurers have tried several ways to control their spending on prescriptions, including creating approved drug lists and tiered plans that favor generics.

CDPHP was the first in the area to see caps as the next step. Robert Hinckley, the Albany insurer's vice president of government and external relations, said it was trying to be ahead of the curve for what cost-conscious employers wanted. Without a cap, he said, "we were looking at a significant rise in prescription rider premiums."

CDPHP implemented caps, of $1,000 and $2,000, on the main prescription plans offered under its exclusive provider organization, or EPO, program.

"This is just one option," Hinckley said. "There are other options, like plans with co-insurance that kicks in after they hit a certain amount."

BlueShield and MVP waited another year to install caps, but their reasoning was the same.

"We had employers saying 'we need some help here, we need more affordable coverage options' " said Gary Hughes, spokesman for MVP. "We saw a cap as a way to respond to that need."

MVP offers two main prescription plans for small groups, defined by the industry as those with between two and 50 employees. One has "first dollar coverage" with the $2,000 cap. The other has an upfront deductible of $100, after which coverage is unlimited.

BlueShield's cap pertains to all of its community-rated, small-group products, including HMO, POS, EPO and preferred provider organization (PPO) plans.

All three insurers offer other small-group plans without caps, but they are ones few employers opt for. One has a 50 percent co-pay on all drugs, and another covers generic drugs with a $10 co-pay. Brand-name drugs may be purchased at a discount, but as an out-of-pocket expense.

Cap concerns

Insurers say caps are fine for most people because they will never reach the ceiling.

"We have found that 96 percent of the members stay under the cap," Hinckley said. "So people were paying premiums for drugs they didn't need."

Alban's concern is for those people, particularly those with chronic conditions, for whom limited coverage could pose a big problem.

"The average name-brand prescription drug cost $100 to $125, so $2,000 can be easy to reach," he said. "You could conceivably spend part of the year with no coverage."

A study published in the June issue of the New England Journal of Medicine found that Medicare plan members who reached a limit on their drug coverage often chose to go without needed medications, hurting their health and erasing much of the savings.

"After adjusting for individual characteristics, we found that subjects whose benefits were capped had pharmacy costs for drugs applicable to the cap that were lower by 31 percent than subjects whose benefits were not capped, but had total medical costs that were only 1 percent lower," the study authors said. "Subjects whose benefits were capped had higher relative rates of visits to the emergency department, nonelective hospitalizations, and death."

Hinckley said CDPHP reaches out to members it sees are getting close to the cap and assigns a case worker to help them find ways to stretch their dollars. BlueShield said in a letter to members that people would not be informed when they reach the limit. All of the insurers pass along discounts to people who must purchase their own medications.

Feedback from Alban and others prompted MVP to make the ceiling optional.

"The brokers said, 'we'd prefer you made it a choice' so we said 'OK,' " Hughes said.